bitcoin

What is true about Bitcoin mining?

-It is easy to verify that a miner has solved the proof-of-work puzzle. -Miners attempt to guess a nonce so that the hash of a proposed block begins with many zeros. -The mining reward is an incentive to include only valid transactions in a block.

Why is it difficult to regulate Bitcoin?

-It is hard to legally define Bitcoin. -There is no central authority that controls Bitcoin.

Which of these properties does a cryptographic hash function have?

-It is infeasible to find two inputs with the same hash. -The result of computing a hash will always be the same for the same input.

Which of these are important moments in the history of Bitcoin?

-10,000 bitcoins were exchanged to deliver two pizzas in Florida. -The 2008 financial crisis undermined trust in the world financial system. -Earlier cryptocurrency proposals, like hashcash and b-money, developed core ideas about peer-to-peer money.

What is true about the Silk Road marketplace?

-Silk Road helped to grow Bitcoin's user base. -The pseudo-anonymity of Bitcoin allowed buyers and sellers to hide the flow of money. -Bitcoin's 2 out of 3 signature transactions allowed Silk Road to mediate disputes between anonymous buyers and sellers.

What are applications of Bitcoin as a platform?

-The blockchain as a public source of randomness (cryptographic beacon). -Colored coins

What is true about a 51 percent attack?

-A miner could use a 51 percent attack to revise Bitcoin's transaction history. -Miners have generally no incentive to attempt a 51 percent attack because it would undermine the trust in Bitcoin and thus devalue the miners' equipment. -It can happen when a miner controls more than half of the global hash power.

What is true about cryptographic hash functions?

-ASICs (application specific integrated circuits) have been designed to speed up the computation of some hash functions. -The hash outputs appear random, but they are actually deterministic. -Hashes are reasonably easy to compute.

What were some difficulties in establishing cryptocurrency exchanges in the US?

-After the 2008 financial crisis, regulators were uncomfortable with financial innovations. -There was no legal framework for the treatment of cryptocurrencies.

What is true about the Bitcoin protocol?

-Anyone can view the blockchain. -Bitcoin wallets require fast computers, preferably custom high-performance hardware. -Only Satoshi Nakamoto can make changes to the Bitcoin Core software.

When did the US government abandon the gold standard?

-At the time of the Nixon shock in the 1970s.

Why are bitcoins valuable?

-Because people think they are valuable. -Because they are backed by the gold standard

What is the status of Bitcoin in China?

-Bitcoin exchanges are effectively banned in China. -In China, Bitcoin is mostly used for speculation rather than for payments.

What are true statements about cryptocurrencies and anonymity?

-Bitcoin transactions are not anonymous, only pseudo-anonymous. -Monero is a cryptocurrency that focuses on anonymity.

What is true about stablecoins tied to the US dollar?

-Tether is a controversial stablecoin because of uncertain backing by US dollar reserves. -Stablecoins are designed to mitigate the volatility problems of pure cryptocurrencies.

How can you store your bitcoins?

-On your computer, using a wallet software -On a piece of paper

Which are good examples of cold Bitcoin storage?

-Paper wallets -Old computers without a network card

What is true about digital signatures where Alice is signing a message for Bob to verify?

-Bob uses Alice's public key to verify the signature. -To prevent the re-use of a signature (replay attack), Bob should ask Alice to append a random number of his choosing before signing.

Which of these comparisons of bitcoin to gold are accurate?

-Both can be kept forever. -Both can be stolen

What are important consensus topics in Bitcoin?

-Consensus on the history recorded in the blockchain. -Consensus on the rules that define the Bitcoin protocol. -Consensus on the value of the currency.

Who are principle stakeholders in the future of Bitcoin?

-Core developers -Miners

What is true about cryptocurrency adaptation?

-Cryptocurrencies face competition from other payment systems, such as Kenya's M-Pesa. -Cryptocurrencies have a chicken-and-egg problem.

What is true about mining hardware?

-Currently, CPU or GPU mining only make sense for some altcoins. -It was initially profitable to mine bitcoins using a CPU.

Which of the following effect a Bitcoin miner's profitability?

-Electricity costs -The current Bitcoin price

In a distributed consensus model, who verifies transactions?

-Every node on the network.

Which of the following are or have been official money in the US?

-Greenbacks -Gold coins -Silver coins

Which of these contribute to Bitcoin's distributed consensus?

-Honest miners build new blocks on top of the longest valid branch of the blockchain. -If a miner proposes an invalid block, no honest miner will build on top of it. -The proof-of-work competition randomizes who creates the next block.

What was the core issue leading to the split of Bitcoin into Bitcoin and Bitcoin Cash?

-How to scale the Bitcoin network to process more transactions.

How can traditional businesses respond to disruptive innovations?

-Ignore the innovations. -Adopt the innovations into their business model. -Lower their prices to be competitive. -Fight the innovations, e.g., by lobbying against them.

What is true about Shamir's 2-out-of-3 secret sharing method?

-It can prevent the theft of bitcoins. -It can prevent the accidental loss of bitcoins.

What is true about O(.) notation?

-It groups algorithms into categories of difficulty, much like the Richter scale for earthquakes. -O(log n) is about as much work as the number of digits of n.

What is true about Bitcoin mining?

-Joining a mining pool mitigates the risk involved in mining. -The location of a mining farm effects its profitability. Due to Bitcoin's block reward halving, miners will eventually subsist on transaction fees only.

What are reasons for the large percentage of unbanked adults in the developing world?

-Lack of trust in corrupt institutions. -Lack of legal concepts such as property titles.

What is true about the Lightning protocol?

-Lightning payments can be routed through multiple intermediaries. -Lightning transactions are trustless, in the sense that intermediaries cannot steal your coins.

What is true about the following crytpocurrencies?

-Litecoin is essentially a clone of Bitcoin, but with a different hashing algorithm. -Ethereum is a blockchain-based platform that supports smart contracts.

What is true about the Bitcoin mining economy?

-Mining hardware has quickly become obsolete in the past. -There is more mining activity if the Bitcoin price goes up.

How can you acquire bitcoins?

-Mining them by solving the proof-of-work puzzle with a powerful computer. -Buying them on a cryptocurrency exchange

What is true about Merkle trees?

-Modifying any part of a Merkle tree changes the hash of the tree root. -They resist modification of their contents. -They are a type of ordered binary tree. -It is efficient to decide whether something is or is not in a Merkle tree.

What must be true for something to function as money?

-Money is a medium of exchange. -Money is a store of value. -Money is a unit of account

How do cryptocurrency assets compare with traditional assets?

-People's valuations of assets can change dramatically, as seen in the bubbles of tulip and bitcoin prices. -Accounting gimmicks can be used for both types of assets to build Ponzi schemes.

What is true about an HD wallet?

-Private keys are generated from a seed phrase. -The private keys in it cannot be recovered without the seed.

What is easy to do with an offline wallet?

-Receiving bitcoins

What do we know about Satoshi Nakamoto?

-Satoshi posted the idea for Bitcoin on the Cypherpunks mailing list. -Satoshi owned and probably still owns a lot of bitcoins.

What are some alternative mining puzzles?

-Scrypt, which is ASIC resistant. -Proof of storage, where you prove you have stored some large data set, like the Large Hadron Collider. -Proof-of-stake, which changes the difficulty according to the amount of currency you control.

What concepts have been suggested as part of Blockchain 2.0 technology?

-Smart contracts -Smart property -Blockchain-based voting

What is true about Bitcoin's mining puzzle?

-Solving the puzzle is analogous to loosing a game of Russian roulette game with many chambers but only one bullet. -The difficulty adjustment ensures a roughly constant block generation rate.

What is true about altcoins?

-Some altcoins are built on top of existing protocols, such as the Bitcoin protocol or the Ethereum protocol. -Some altcoins have significant innovations, such as Turing completeness and the Byzantine Consensus model. -Currently, Bitcoin has a far larger market capitalization than any single altcoin.

What is true about the Bitcoin development community?

-The Bitcoin development community grew from a small group into a large community of contributors. -Satoshi relinquished control of the Bitcoin code repository to a small number of developers.

What are some examples of decentralized structures?

-The Bitcoin protocol -al-Quaeda

What were milestones in the recognition of bitcoin as an asset?

-The FBI's decision to sell bitcoins seized from the Silk Road -The IRS's decision to treat cryptocurrency as property for tax purposes.

What is true about Bitcoin's block size limit?

-The SegWit protocol upgrade was a soft fork that increased block capacity. -Several protocol changes were proposed to raise the block size limit. -With a block size limit of 1 MB, only a small number of transactions per second can be processed.

What is true about Bitcoin transaction fees?

-The length of the transaction in bytes affects the fee that you should pay. -Paying a higher fee makes it more likely that a miner will include your transaction in a block. -Bitcoin transaction fees depend on supply and demand.

Which of these were among Satoshi Nakamoto's motivations for creating Bitcoin?

-The possibility to exchange money without a central authority. -Banks taking on too much risk, leading to credit bubbles. -The inflation risk of fiat currencies.

The difficulty of Bitcoin's mining puzzle is adjusted based on what?

-The previous difficulty level. -The time it took to mine the last 2016 blocks.

For cryptocurrencies, what are good 'for or against' arguments with regard to ASIC resistant mining puzzles?

-The puzzle should be ASIC resistant. Otherwise specialized miners will control blockchain generation. -The puzzle should be ASIC friendly. Otherwise miners can easily retool a general purpose computer for other problems, so they have no explicit stake in the currency.

Which of the following is true about public/secret key encryption?

-The receiver of a secret message only needs his/her own private key to decrypt it. -The sender of a secret message only needs the receiver's public key to encrypt it.

Which are necessary for a Bitcoin transaction to be valid?

-The transaction must include a tip for the miner. -The transaction must be signed by the miner that includes it in a block.

What is true about Bitcoin's blockchain?

-The transactions in each block are organized using a Merkle tree. -Each block contains a coinbase transaction, which rewards the miner of that block. -Each block contains a hash of the previous block in the chain.

What is true about colored coins?

-They can represent ownership of assets, such as stocks or stadium tickets. -They can represent altcoins.

Why are ASIC resistant hash functions useful?

-They help level the playing field when creating mining puzzles. -They were invented to make cracking passwords harder.

What can Bitcoin's scripting language be used for?

-To facilitate multi-signature transactions. -To destroy bitcoins. -To facilitate micropayments.

What are some reasons for people's interest in crytpocurrencies?

-Traditional transaction costs of about 3% are high for retailers. -Crytpocurrencies allow people to control and spend assets without a middleman.

What are advantages of Lightning, compared to Bitcoin?

-Very small transaction fees. -Many more transactions per second. -Almost instant transactions.

What are the key problems that a distributed consensus model has to solve?

-Who verifies transactions? -Who creates coins? -Who maintains the ledger of transactions?